California Spine And Neurosurgery Institute v. JP Morgan Chase & Co.

Background

California Spine And Neurosurgery Institute sued JP Morgan Chase and United Healthcare Insurance Co. over payment for complex lower-back surgery performed for an insured patient identified as “BM.” The provider was outside United Healthcare’s network. It alleged that, before the surgery, United Healthcare approved coverage and told the provider that out-of-network care would be paid at “usual and customary” rates.

The provider billed $77,000. United Healthcare paid $2,300 and stated that the allowed amount for all services was $6,600, including amounts chargeable to the patient’s deductible, copayment, or coinsurance. The complaint asserted state-law claims for quantum meruit and promissory estoppel and sought $74,700, less applicable patient cost-sharing amounts. The complaint did not allege that BM assigned the provider any rights under the employee health plan.

Defendants’ arguments and jurisdiction

The defendants argued that the claims were expressly preempted by the Employee Retirement Income Security Act of 1974, or ERISA. ERISA expressly preempts certain state laws that relate to an employee benefit plan. The defendants also removed the case from state court based on federal-question jurisdiction. At oral argument, the parties represented that diversity jurisdiction also applied, and the court accepted that representation based on the amount in controversy and the citizenship allegations in the complaint.

Court’s analysis

The court applied the standard for a motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c), which is functionally the same as the standard for deciding whether a complaint states a legally sufficient claim under Rule 12(b)(6).

The court held that both state-law claims had a prohibited “reference to” BM’s ERISA plan. First, the alleged promise to pay usual and customary rates arose from the provider’s effort to verify BM’s coverage and benefits under that plan. Without the plan, the court reasoned, the provider would not have made the call, United Healthcare would not have made the alleged coverage representation, and the provider would not have had the alleged promise supporting its claims.

Second, the court found that the provider’s damages allegations also referred to the plan because the requested amount excluded deductibles, coinsurance, and copayments. The court concluded that those terms derived from BM’s insurance coverage and benefits under the plan.

The court distinguished two decisions cited by the provider. It found that the provider had not identified a separate agreement with United Healthcare comparable to the provider agreements involved in one of those decisions. The court also found that the provider’s claims were not based on a separate provider agreement setting payment rates. Instead, the claims depended on BM’s plan and the alleged coverage promise.

Disposition

The court granted the defendants’ motion for judgment on the pleadings without prejudice. It denied the provider’s request to add more allegations about United Healthcare’s oral representations concerning copayments, finding that amendment would be futile because the state-law claims would still refer to BM’s ERISA plan.

The court granted the provider’s request to amend the complaint to allege that BM assigned rights under the plan and to add a claim under ERISA’s civil-enforcement provision, 29 U.S.C. § 1132(a). The court ordered any amended pleading to be filed by January 20, 2020. It also denied as moot the defendants’ request for judicial notice.